Re-defining the land tax base in highly urbanised locations

Taxation Institute Australia
Publication Type:
Journal Article
Australian Tax Forum: a journal of taxation policy, law and reform, 2014, 29 (3), pp. 455 - 478 (20)
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Despite numerous calls for land to contribute more to government revenue, the difficulty governments confront is that recurrent land taxation is assessed on a number of different bases both within Australia and internationally, and not all are economically efficient. While there is broad support for a base which reflects unimproved land value in that it reflects highest and best use since taxing it will not influence what improvements are made on the land, in practice the existing use of capital improved value is most often adopted even though it is not an economically efficient base. If increased revenue is to be raised from an efficient land tax, the base must be efficient. While unimproved land value is an efficient base, as there are few vacant land sales available in highly urbanised cities, there is a paucity of information and evidence on which to determine unimproved land value. As a result of this paucity tax liability assessment is neither simple nor transparent when determining land value using improved property transactions.
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